Doing the Dead Cat Bounce

from Yahoo! Finance:



Doing the Dead Cat Bounce

by Robert Kiyosaki
Friday, February 12, 2010


Dow 5,000 in 2010?

In my last column I predicted a “dead cat bounce” in the stock market and a possible Dow plunge to 5,000 this year. Obviously, many readers mocked my prediction.

But understanding the dead cat bounce is vital, especially in today's market.

Simply put, a dead cat bounce looks like Diagram 1 below: http://finance.yahoo.com/banking-budgeting/article/108837/dead-cat


The market crashes, rebounds, and runs out of steam, then crashes again…unfortunately, and possibly, to a lower low.

When professional investors observe a dead cat forming, many will begin to sell. If their selling leads to a panic, the stock market goes even lower.

Putting today’s numbers to the dead cat diagram gives this topic more meaning.

In 2002, the Dow hit a low of 7,286. .........(more)

The complete piece is at: http://finance.yahoo.com/banking-budgeting/article/108837/dead-cat

Gold is always a foolish investment...if things get as bad as the doom prophets are saying then even gold won't save you. What will there be to buy with it after all?

and wants to sell out.

It lasts forever. You can trade it and eat it. :)

And even then, where do you spend you gold during a Zombie Invasion?

I have a few friends that are into the whole gold BS, I tell them, if everything collapses, what are you going to eat? Gold?

Gold will be worthless when people are hungry.

Great stories from the Weimar Republic of people "selling" solid gold candle holders for a loaf of bread.

All commerce is relative.

It bottomed again in 2008/early 2009 as a result of a meltdown in the financial sector.

I've also predicted a new bottom, mostly because the market is so overvalued right now when you look at historical P/E ratios. My dad invested only in companies with tight ratios, something I've continued, meaning the losses in paper value might not be as great as, say, something with a truly insane 300:1 ratio, common among a lot of tech stocks.

That 10,000 Dow is the aberration. My own best guess is that a rationally priced market would bring a 7,000 Dow but that it will likely drop far below that before it stabilizes.

And by force I mean those who don't have those kind of ratios will not sell, and thus go bankrupt?

and that's basically what drives the market once the big boys start to move their money around. I do see more direct manipulation in commodities and bond markets than I do in the stock market, though.

I just don't trust a market that is this overvalued. That's why my guess is that it will have at least one more dizzying drop before it stabilizes.

in the stock markets would come from the etf sector. Watch the end of day volume on an hourly chart and you can see all the funds re-adjusting their portfolios (a huge spike in Vol). We may very well see a dead cat bounce, but 5000 on the dow, I don't see that happening. However with the feds program to discontinue buying of mortgages ready to happen in march we may see a double bottom correction. 9600-9700 on the dow... and gold is really high right now along with many other commodities so a correction in that market may signal a boost in the equities.

sum into the stock/bond markets through "retirement instruments". Most people's options are very limited because their employers control what is offered, and even fewer are aware of what options do exist.

In reality, it doesn't match up to his dead cat bounce example.

I wouldn't take his advise, or the silly advice of his rich and poor dad.

Taken with a salt shaker or two, there is some good analysis here

It's his premise ("GOLD!! GOLD!!! BUY GOLD!!!!") that's fraked up

Here is the reality of the past year:

http://bigcharts.marketwatch.com/charts/big.chart?symb=djia&compidx=aaaaa%3A0&ma=0&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=2&size=2&state=8&sid=1643&style=320&time=8&freq=1&nosettings=1&rand=9311&mocktick=1&rand=3932

Here is the past decade:

http://bigcharts.marketwatch.com/charts/big.chart?symb=djia&compidx=aaaaa%3A0&ma=0&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=2&size=2&state=8&sid=1643&style=320&time=13&freq=2&nosettings=1&rand=7502&mocktick=1&rand=3181

They want everyone to be as miserable as they are.

Honestly. Have you no respect?
:(

Chill. ..... And I was just posting the title that was on the piece.

:rofl:

People here seem to have a difficult time distinguishing between the poster and the author.

Dow will drop 500 one day. Rise 300 the next. Then drop back to the 300 the following day and remain around there over the next few weeks or so.